Higher home prices could temper US housing momentum
Signs are mounting that rising home values are starting to close the door for more Americans, threatening to temper the momentum in residential real estate.
Purchases of previously owned houses unexpectedly fell in July to an 11-month low and sales of new homes were the weakest this year, reports showed this week. While the median time on the market for existing properties was 30 days in July compared with 36 days a year ago, indicating resilient demand, the number of listings remains lean and problematic.
Limited inventory has been a nagging theme for the housing market and is the primary reason why home prices continue to climb and outpace wage growth. While borrowing costs remain low by historical standards, affordability is its weakest of the expansion. The number of Americans who view home-purchase conditions as “good” has fallen to a six-year low, according to the University of Michigan’s latest consumer sentiment survey. To be sure, more still say the buying environment is “good” than “bad.” It’s just not getting better.
The S&P CoreLogic Case-Shiller nationwide home-price index stood at a record in May, the latest data available, while the cost of a previously owned home in June also stood at an all-time high. The result: the share of consumers in the latest University of Michigan survey who said home-buying conditions were bad because of soaring prices reached an 11-year high this month.
Home-price growth had been consistently outpacing wage growth, Lawrence Yun, chief economist at the National Association of Realtors, said at a press briefing accompanying the release of the July existing-home sales report.
